Commercial Real Estate: Important Considerations Before Buying Or Selling

Buying or selling commercial real estate can be a complicated process. There are many factors to take into account for the optimal transaction. Educating yourself ahead of time is the best way to make the process go smoothly, easily, and profitably. The following tips are geared to get you started on the path to success.

Know about all the fees and taxes involved in investing in property and be prepared to pay them. If you are looking at properties that need repair, understand that you will have to bring them up to code in order to resell and make money. Have a budget ready that will cover all your expenses without stress.

On the real estate market both buyers and sellers are well advised to remain open until a potential deal is well and truly sealed. It is tempting to commit to a particular offer or home when the sale process is just starting. There is a great distance between an interest expressed and money changing hands; homeowners who commit themselves to a deal too early risk getting taken advantage of.

When you are renting out a property, try to be prepared for a vacancy. Having a vacancy in one of your properties can cost you a lot of money. If you have a vacancy, try to fill it as fast as possible. You should always remember that you may need to have some money set aside in case of a vacancy because you will probably experience one at some time.

Be sure you do your research before buying properties from sheriff or tax sales. While these sales are a great way to get a deal on a property, you need to know in advance if any of the properties available have other outstanding liens (a charge upon real or personal property for the satisfaction of some debt or duty). Once you become the owner of the property, you may also be responsible for settling these liens.

In the long-term, commercial real estate investments are bound to be among the most profitable investments possible. Nonetheless, it can be frustrating to find a good commercial property, and managing commercial real estate can be quite challenging. Sometimes it’s easier to handle a larger investment than a smaller one because the increased income will allow you to hire staff and delegate day-to-day responsibilities. In the final analysis, you must weigh the pros and cons for yourself and make the decision that will bring you the greatest returns with the least hassle.

You’ll never have to worry about commercial real estate loan again! Visit us on the web at business loan consultant in malaysia to learn more.

Top Stocks For 2011-12-14-15

USPS, Ultimate Sports Inc, USPS.PK

DrStockPick News Report!

DrStockPick News Report!

USPS, Ultimate Sports Inc, USPS.PK

“Ultimate Sports, Inc. Announces Receipt of Prestigious Award“

 

DrStockPick News Report!

Tuesday July 28, 2009

Lafayette, Indiana � (CRWE NEWSWIRE) � July 28, 2009 � Ultimate Sports, Inc. (USPS.PK), a manufacturer and supplier to the recreational vehicle industry, announced today that the firm�s X2 Triple Threat Skis were granted the �Best Ski in the Industry� award by SnowGoer Magazine.

The X2 Triple Threat Skis have remained unchallenged in the snowmobile industry and are still considered the best all around skis produced to date.

Kevin Metheny, President of Ultimate Sports, states, �It�s an honor to receive an award for an item that we are so proud of. We intend to continue producing cutting-edge equipment and sharing our product line with the public.�

About Ultimate Sports, Inc.
Ultimate Sports specializes in every item, large and small, that snowmobilers need in order to enjoy the sport and improve their performance�especially snowmobile skis of all types. We have an extensive inventory of carbide studs, mount kits, wear bars, suspension parts, snow flaps, alignment bars, and so much more. Visit www.usi-skis.com for more information.

Forward Looking Statements:
This press release contains certain forward-looking statements. Investors are cautioned that certain statements in this release are “forward looking statements” and involve both known and unknown risks, uncertainties and other factors. Such uncertainties include, among others, certain risks associated with the operation of the company described above. The Company’s actual results could differ materially from expected results.

________________________________________
Contact:
Brokers and Analysts
Orion Financial
800-400-1290

 

Add USPS to your Watch List!, do your homework, and like always BE READY for the ACTION!

2 High-Tech Stocks with 50% Upside in 2012

Here at StreetAuthority, we're always looking for "game-changing" stocks. In fact, my colleague Andy Obermueller has an entire newsletter dedicated to the subject. These "game-changers" are usually smaller firms that are developing revolutionary new products. Yet we also have our eye on larger, more well-established companies that seek to push the envelope, developing technologies that can enhance the customer's experience in new and different ways.

These larger firms know heavy investments in research and development (R&D) are crucial. R&D efforts, which often yield a treasure trove of patents, can help them command firm pricing and generate impressive margins.

 

Right now, there is a pair of "game-changers" I have my eye on. They may be well-known, but they are not widely-loved by Wall Street, at least not yet anyway. Each trades for less than half of its 52-week high, and each looks poised for a solid rebound in 2012. It's just a coincidence that they cater to two of the five senses -- sound and sight.

Dolby Labs (NYSE: DLB)
This name has become synonymous with crisp sound, whether at a movie theatre, in your car or in your living room. A rising tide of consumer-electronics companies has licensed Dolby's technology, helping sales rise by at least 10% every year for the past decade. Just as impressive, its focus on patent licensing yielded remarkable profit margins: Operating margins typically exceed 40%, while net margins have been above 30% for four straight years. These margins helped Dolby generate more than $800 million in free cash flow in the past three years.

Still, even high-growth stocks sometimes need a pause before resuming their upward trajectory. Shares of Dolby Labs have fallen more than 50% from the 52-week high and are back at levels seen four years ago. Why the sell-off? Because the next version of Microsoft's (Nasdaq: MSFT) Windows operating system -- known as Windows 8 -- is due to ship in 2012, and it will not come pre-bundled with Dolby's audio software. (Dolby currently earns a tiny profit on every Windows PC shipped, thanks to a soon-to-expire licensing agreement.)

To be sure, the loss will likely negatively affect the company. PCs represent 30% of total sales and roughly 20% of operating income. But Dolby continues to make clear progress in other areas, especially in new mobile devices, set-top boxes, gaming platforms and in international markets. In the near-term, new licensees simply offset the Microsoft loss. As a result, sales and earnings per share (EPS) are likely to be stagnant in fiscal (September) 2012 and 2013 at about $950 million and $2.50 per share, respectively.

Analysts say these numbers could get a solid boost in subsequent years as recent new relationships will take devices that are just now being designed by many consumer electronics firms to hit the market within 18-24 months. "The combination of the global transition from analog to digital broadcasting and Dolby's significant presence in digital media will provide a basis of growth once the company gets through the Windows 8 transition," note analysts at Dougherty & Co.

Analysts at Barrington & Co. agree. They boosted their rating to "outperform" on Nov. 22 with a $43 price target. They cite video streaming, where Dolby works with Apple (Nasdaq: AAPL) and others as one of several growth drivers.

Meanwhile, strip out the $1 billion net cash balance, and shares trade for around 6.5 times projected 2012 profits. To support the stock, Dolby is in the midst of a $250 million buyback plan (another one may follow suit after the current plan is completed). More important, the company boosted R&D spending by about 25% in fiscal 2010 and again in fiscal 2011 (to a recent $124 million), which should keep the company ahead of the pack in terms of next-generation technology.

Cree Research (Nasdaq: CREE)
Back in June, I predicted this stock would post a strong second-half rally. Little did I know the market would go on to post a very challenging second half, taking this stock even lower. Still, the more I research this stock, the more I become convinced it is on the cusp of very robust growth during the next five years.

As a quick recap, Cree's light-emitting diode (LED) lights last far longer than traditional incandescent bulbs and consume a lot less power. To stay on the cutting edge, the company has been boosting R&D spending at a 20% annual clip to a recent $115 million in fiscal (June) 2010. The R&D effort means Cree's LEDs are generally considered to be the most durable in the industry. The company also offers the widest range of form factors for these lights to be used by architects and industrial designers.

Why the stock price plunge? China, the biggest market for LED lighting (37% global share in 2010),  had sought to focus more on domestic suppliers, But it ultimately found that the Chinese-made LEDs failed at alarming rates. Cree stands to pick up lost market share in China in 2012 and beyond, as it has been making the case that in terms of total cost of ownership, its lights are the cheapest. Still, the Chinese hiccup will lead EPS to drop from $1.70 in fiscal 2011 to roughly $1.20 in fiscal 2012, before an expected rebound to $1.70 in fiscal 2013.

Although Cree has been publicly traded since 1993, its most impressive growth may still lie ahead, according to Goldman Sachs. It predicts LED lighting will grow at a 30% annual pace through 2020, by which time more than half of all lights should be LEDs. Europe is probably going to lead the way. By the end of 2012, half of all newly-installed lights in Europe will need to be LEDs, according to EU mandates, with this figure rising to 100% by 2015. In the United States, around 15% of new buildings constructed in 2011 were made with LED ballasts. This figure is expected to steadily rise, even in the absence of any Washington mandates.

Goldman Sachs calls Cree a "top pick," with a $40 price target, which represents 60% upside. "We see the company's product portfolio optimally positioning the company to address the applications (outdoor, commercial), that will see the most significant pace of adoption over the next several years given the best returns and payback profiles."  The fact that this stock began the year above $60 and now hovers around $25 sharply discounts this bright outlook.

Risks to Consider: A slowing global economy in 2012 could lead to delays in adoption of Dolby and Cree's newest technologies.

Action to Take-- > These are stock picks for the long haul. It's unclear what the next quarter or two will look like for these in-transition firms, but their multi-year view remains quite bright as they reap a payoff from heavy R&D spending. These stocks may not rebound to their recent 52-week highs in 2012, but in each case, a 50% upward move appears reasonable.

Cheap Finance Stock in Focus; Popular Inc.

Popular Inc. (NASDAQ: BPOP)� recently� announced its fourth-quarter financial results, posting� a net loss of 227.1 million for the fourth quarter compared with a net income of $494.1 million for the previous quarter and a net loss of $213.2 million reported for the same period in 2009.

For the full year 2010, the company�s net income came in at $137.4 million, compared with a net loss of $573.9 million reported for the same period in 2009.

During the fourth quarter of 2010, the company reclassified around $1 billion of loans held-in-portfolio to held-for-sale, which had a negative impact of $186 million on fourth-quarter earnings. The company expects majority of these loans to be sold in the first quarter of 2011.

Popular reported a decline of $720.3 million in the fourth-quarter non-interest income, compared with the third quarter of 2010.

Commenting on the fourth-quarter and full-year 2010 financial results, Richard L. Carrion, chairman and CEO of Popular, said that during 2010, the company was successful in strengthening its capital base and it leadership position in the Puerto Rico market. Carrion further said that the company also made significant progress in enhancing its asset quality. He further added that the important steps that the company took in 2010 position it to achieve operational profitability in 2011.

Puerto Rico-based Popular is a bank holding company.

• Need fast service and cheap rates from a broker? Click here to see my favorite place to trade BPOP
• Want more? Check out the message board buzz for BPOP
• See which newsletters are recommending this stock pick
• Get breakingnews alerts on this stock:� http://thestockmarketwatch.com/

How to Invest in the Next Game-Changer in Smartphones

Intelligence always moves to the edge of the network.
 
That wasn't always true of the communications business. The only thing "smart" at either end of this network might be one of the callers, and that certainly varied. Phones used to be nothing more than a speaker, a microphone and set of buttons that sent audible tones that the system could recognize as numbers.
 
  Now, that has changed.

The infrastructure of the nation's communications system is still home to some impressive technology, but the real genius is at the edge of the network -- that is, the tablet devices and computers we use to process information and in the smartphones we use to communicate.

After all, the smartphones we all have in our purses or pockets contain more capability than the computers NASA had at its disposal when Neil Armstrong was walking on the moon.

The smart money invests at the edge of the network. The rest is just a commodity play.
 
The single most important change that this network will undergo in the coming years is right at the edge. It is the integration of electronic commerce functionality into our smartphones.

I have written extensively about this in my newsletter, Game-Changing Stocks, and I will continue to. Simply put, I think it's the Next Big Thing.
 
So far, I've been telling my readers about the consumer side of the market. But what we really need to look at is the company that merchants rely on for the state-of-the-art equipment that will allow for seamless smartphone transactions to take place.
 
That company is VeriFone (NYSE: PAY).
 
It's the leading provider of hardware for electronic payment processing. And here's the thing: Nearly every one of the devices that you see on the merchant's counter will need to be replaced.
 
There are two reasons for this. The first: Customers will be paying with highly secure near-field communication chips instead of handing over their credit or debit cards. But the other trend that's going on at the same time is the mass unplugging of retail point-of-sale terminals.
 
Well, "unplugging" might be the wrong word. The enterprise system is still there, but they're increasingly running in the background. The sales clerk is just as likely to process the transaction with a portable device as to ask the customer to walk back to the cash register.
 
Bottom line: Smartphone commerce and device-toting sales clerks are going to mean a one-two punch for VeriFone's business, which I think is going to explode in the coming years.

Major retailers such as Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) are already getting interested.

It is my prediction that smartphone-based commerce will become the fastest-adopted technology in U.S. history.
 
VeriFone started a trend of its own. The company, founded in 1981, came up with the first electronic credit-card processing system. In the old days, the retailer took an imprint of your card sent the charge slips to the bank to be verified. As banks began to lower their credit standards for a credit card, retailers wanted to protect themselves from getting stiffed by customers who were over their limit, and VeriFone's system was the first that allowed retailers to do that.
 
But with every new technology that has come to market, VeriFone has been there to take advantage of it, from new and innovative ways for customers to pay, to new and innovative ways for retailers to connect. It is the market leader with an unassailable industry position.
 
The best reason to use a near-field communication chip in lieu of a physical credit card is that you don't have to hand your account information to an unknown sales clerk. The transaction is totally secure and invisible to the clerk. With a smartphone-based transaction, that won't be possible.
 
Security is clearly a major concern, and complying with the stringent security requirements set forth by Visa (NYSE: V), Mastercard (NYSE: MA), American Express (NYSE: AXP) and other financial institutions is a huge moat for the VeriFone business. The whole system runs on a secure proprietary operating system. That is a wall around this business that no other competitor can breach.
 
Sales at this company are a billion a year. That's what the company pulls in keeping the existing retailer base supplied with hardware. When one considers the possibility that so many of those terminals need to be replaced with new technology, the numbers get impressive, and quickly.
 
The thing to do is to beat the rest of the pack to the trade. Smartphone-based commerce won't make headlines until it's implemented at Wal-Mart, and I think these shares are worth owning well in advance of that date.
 
While the company, with a market cap of $5.6 billion, is a little larger than my recommendation inGame-Changing Stocks, its growth profile is just too sweet to ignore.
 
Two other things to like about this stock...

One, most of its shares are held by institutions, some 91%. That means the shares that are traded each day are more likely than not to be the 9% held by individual investors. That's always nice -- a less visible supply of shares means that the effect of good news will be magnified.
 
The other aspect to like about this company is its increase in shareholder equity during the past three years, where the portion of the company owned by the shareholders has risen in value from $72 million to $1.1 billion. This is evidence of strong financial management and bodes well for the company's ability to translate market demand into an increased stock price. I don't know about you, but I like that.

SM: General Dynamics Changes Tactics

Historians will long debate whether the wars in Iraq and Afghanistan helped or hurt the U.S. There's no question, however, that the two conflicts improved the business of General Dynamics (GD), the nation's third-largest defense contractor. In 2011, the final year there were combat operations in both countries, the U.S. government bought $22.6 billion worth of guns, communications gear and other tools of modern warfare from the company -- twice what Uncle Sam purchased when the Iraq War began. But now, as the conflicts wind down, some experts say Congress is likely to slash defense spending. The result: General Dynamics CEO Jay Johnson, a retired four-star admiral, must devise a new corporate battle plan. "The situation is dynamic and disquieting," he says.

The firm's future is clouded not only by the end of the wars but also by a political version of the fog of war, analysts say. The failure of last summer's deficit talks triggered an automatic budget-cutting process -- which, if not altered, will result in a 10-year, $500 billion defense cut starting in January. That mandatory cut, says David Rowlett, a T. Rowe Price aerospace and defense analyst, would be "the worst-case scenario" for General Dynamics.

Enlarge Image

Close Photograph by Stephen Voss for SmartMoney

General Dynamics CEO Jay L. Johnson at the company headquarters in Falls Church, VA.

For his part, Johnson, a Vietnam War-era fighter pilot who served on the Joint Chiefs of Staff, says his company has been planning for cuts in military spending for "quite some time." One component of his strategy involves focusing the firm more on ships and submarines, a business General Dynamics (and its predecessor) has been in for more than a century. The company is also getting a boost from its thriving Gulfstream private-jet business, says Richard Tortoriello, aerospace and defense analyst at S&P Capital IQ. Another factor in the company's favor: U.S. law. Statutes on the books since the late 1920s require the government to keep the military at a certain level of readiness, a rule analysts say essentially guarantees that the Pentagon isn't going to cut spending entirely.

Nevertheless, General Dynamics' 65-year-old boss will be spending much of his time this year preparing his company in case those big cuts come to pass. At the firm's headquarters in Falls Church, Va., Johnson talked about submarines, dealing with China, and how this budget battle might be his last.

Do you think these automatic spending cuts will happen?

No one on earth, as of this moment, can declare with certainty how it's all going to turn out. I'm not going to solve the problem today, but we're agile enough, so we'll deal with it. It helps that we are very efficient at every level from elemental things like how you negotiate contracts to how complete a design is when we actually start bending metal.

What about replacing the revenue lost as a result of the end of the Iraq and Afghanistan wars?

We're very disciplined about things like cost control, continuous improvements, efficiencies and the agility of our business. And this is a threat-based military, so it always has to be ready to respond. Fundamentally, we are relevant to the fighting force, and that will remain so even in a declining defense budget.

Will international sales help offset some of that decline?

Yes, international sales in our combat-systems group was 34 percent of that group's sales last year, and it's probably going to be close to 40 percent in the next three or four years. We sell through the U.S. government to foreign countries; there are rules and regulations that we comply with in all of those spaces.

Are you putting more focus on the shipbuilding business, too?

I believe shipbuilding will be a very steady business for General Dynamics. Submarines and surface combatants, like destroyers, are our stock and trade. There's a lot of water out there, especially in Asia Pacific, and a huge part of global commerce moves by sea. So freedom of the seas and unimpeded trade are hugely important to the global economy, and the U.S. Navy has been a part of that for a long time. That will not change.

In Asia, is the main issue China?

Yes, but I don't view China today as a threat, if you will. But you have to be very cognizant of what other navies are doing, what other militaries are doing, and respect both their scale and capabilities and make sure you always keep yourself at the leading edge of that competition curve.

Private jets have been a growing business. Who are the primary buyers of Gulfstreams?

They are primarily private companies and individuals, and last year, 70 percent of orders came from outside North America. We are also starting to see a return of large U.S. publicly traded companies, which I think is very healthy.

Corporate executives were vilified for using your jets a few years ago.

They've taken a lot of abuse, mostly politically inspired, but I would tell you that we're very gratified to see the North American market starting to return.

General Dynamics recently appointed Phebe Novakovic as its president and chief operating officer. Is she being groomed to take your place one day?

It's an affirmation of how serious we are about planning and the depth of our bench. And whether Phebe will end up as the CEO, you'll have to ask the board of directors; but it certainly doesn't take much to figure out that if she's coming in as the president and COO, she's probably in a strong position.

Apple Says Inspections of Factories Start Today

Apple (AAPL) this morning said it has requested that the Fair Labor Association, a thirteen-year-old- consortium of companies, academics institutions and non-governmental organization, begin conducting “special voluntary audits of Apple’s final assembly suppliers,” including factories owned by Foxconn in Shenzhen and Chengdu in China.

The inspections were scheduled to start today, Apple said.

Apple’s CEO Tim Cook said the inspections were “unprecedented in the electronics industry” and that the Association would interview “thousands of employees about working a living conditions.” He said Apple’s suppliers had “pledged full cooperation.”

The announcement comes a month after Apple issued a report on how its suppliers met Apple’s “code of conduct,” and also follow a January 27th memo to Apple staff by Tim Cook in which Cook responded to a damning New York Times article on conditions in some Chinese factories serving Apple.

Apple shares this morning are up $5.82, or 1%, at $499.26.

Fin.

Top Stocks For 2011-12-6-9

STDF, Steadfast Holdings Group Inc, STDF.PK

DrStockPick Stock Report!

DrStockPick News Report!

STDF, Steadfast Holdings Group Inc, STDF.PK

“Steadfast Holdings Group, Inc. Hires Builder and Contracts

for First Nine Residential Units“

DrStockPick Stock Report! Monday July 20, 2009

“Steadfast Holdings Group, Inc. Hires Builder and Contracts for First Nine Residential Units“

East Haven, CT - (WORLD STOCK WIRE) - July 20, 2009 — Steadfast Holdings Group, Inc. (OTC Pink Sheets: STDF) through its Banx and Green Group, Inc. subsidiary has completed an agreement with Peter Waxman to build homes using environmentally, energy efficient structurally insulated panels (SIPS).

The Company has been offered an option to purchase PeterBuilt Homes LLC. Mr. Waxman is a licensed contractor active in the states of Louisiana and Mississippi where he has worked for more than 15 years and is capable of getting building permits expeditiously. The first nine homes will be built in various Gulf Coast communities as part of a roll-out plan for the region. We expect to build several hundred homes from Baton Rouge, Louisiana to Biloxi, Mississippi. These homes are important to the region because they are affordable housing based on a solid platform with reduced operating cost thus making them sustainable properties for their owners.

The Gulf Coast region is in dire need of housing and has several housing programs in place. These programs range from low interest/low down payment mortgages to government grant programs ranging up to $60,000 for non-luxury homes. The models we are building are 1,400 square feet and range in price from $125,000 to $150,000 depending on their interior design. In addition, there are models available up to 2400 square feet.

In the State of Louisiana there are more than 30,000 homes needed for buyers who have already pre-qualified for these programs. In the State of Mississippi the need for housing is similar in scale to Louisiana for their pre-qualified buyers. The City of New Orleans has in excess of 4,000 pre-qualified buyers for their grant program but a lack of affordable housing options to purchase. We are in the process of contacting the various regulatory and grant agencies for participation in these programs.

Funding for the project is expected to close prior to August 1, 2009. The return to the funders is a participation of up to 33% of the net profit from each home purchased. The initial capital is expected to be $2,000,000. Three of the homes are pre-sold and we expect the others to be sold at or near ground breaking.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release that are not historical, are forward-looking statements that are subject to risks and uncertainties that could cause results to differ materially from, those expressed in the forward-looking statements, including but not limited to certain delays and risks detailed from time to time in the company�s filings with Pink Sheets or the Securities and Exchange Commission.

Contact
Investor and Media Relations
WSMG
e-mail: info@wsmg.biz

John Calash, President
Steadfast Holdings Group, Inc.
641 E Main St
East Haven, CT 06512
USA

Phone: 407-641-0705
Fax: 203-466-0600

Add STDF to your Watch List!, do your homework, and like always BE READY for the ACTION!

6 utilities with takeover potential

My No. 1 rule is to never buy a takeover target you don�t want to own if there�s never a deal. The six companies reviewed below meet this criterion.

Meanwhile, all six are cheap and small enough for giants to swallow. Balance sheets are solid, dividends are safe and management is investing in long-term growth. Any serious offer will have to be compelling.

Buying Atmos Energy (ATO) would require navigating regulators in the 12 states where it distributes natural gas. None of these jurisdictions, however, are contentious.

FERC is the biggest potential hurdle. This year the unpredictable commission fined the company $12 million for alleged misconduct at its intrastate Texas pipeline operations.

On its own, however, Atmos is set to grow at least 4 percent to 5 percent a year, and the stock sells for just 121 percent of book value. There�s little risk buying Atmos Energy, a perennial value up to $33.

CMS Energy (CMS) has appeal as a reliably growing electric and gas system on track to expand earnings 5 percent to 7 percent a year by investing $6.6 billion through 2016. Merging into a financially stronger company would reduce the cost of the needed capital.

FERC approval would be a wild card, depending on who the acquirer is. But relations with Michigan regulators are solid. Buy CMS Energy up to $22.
NiSource (NI) and Williams Companies (WMB) saw their market appeal as pipelines soar this autumn as sector mergers heated up. Both stocks, however, still trade at discounts to likely offers.

Canadian energy giant Enbridge, for example, allegedly offered $28.50 per share for NiSource earlier this year.

Williams is now a pure play on pipelines and energy infrastructure; last month, for example, it bought a privately held system in the Marcellus Shale for $2.5 billion.

NiSource also runs a regulated Indiana electric utility and gas distribution systems in several states. But its growth is energy midstream, exemplified by its under-construction 90-mile dry and wet gas gathering system in the Utica play in eastern Ohio.

Even at a market cap of $18 billion, Williams is less than half the size of Enterprise Products Partners LP. FERC policy on pipeline deals is unknown.

But Nisource and Williams look set to prosper with or without deals and are buys up to $20 and $30, respectively.

New Jersey regulators effectively killed an attempt by Public Service Enterprise Group (PEG) to merge with Exelon Corp. in the last decade.

But the former�s well-run power plant fleet, newly solid relations with Garden State regulators and a three-year capital program of $6.7 billion remain attractive.

So are its prime geographic location and demonstrated ability to cope with abysmal conditions in the wholesale electricity market.

A serious offer would have to be in the mid- to upper 30s. The dividend is safe, generous at nearly 5 percent and was raised 3.7 percent last month. Public Service Enterprise is a buy up to 32.

Low wholesale power prices have been offset by sharply declining fuel costs at Calpine Corp. (CPN) at its gas-fired plants. Calpine is in expansion mode, adding a 485-megawatt project in Louisiana last month.

This is not the Calpine of a decade ago, which wound up in bankruptcy court in 2005. New capacity is pre-sold, and there�s no debt maturing before June 2014. A successful offer would have to be in the high 20s.

Calpine may never fetch a bid. But it�s growing and is a solid buy on its own merits up to 18.



Related articles:

• Dominion: 'Best is yet to come'
• Four utilities with 5%+ yields
• Exelon: Nuclear gains
• Southern Company: Stability and yield

Applied Signal, Mercury Computer Rise After Boeing/Argon Deal

Today’s news that Boeing (BA) is acquiring Argon ST (STST), a defense electronics company, for $775 million has triggered some speculative action in shares of Argon’s rivals.

Merriman Curhan Ford analyst James McIlree pointed out in a research note that the two companies most comparable to Argon are Applied Signal Technology (APSG) and Mercury Computer Systems (MRCY), and shares of both companies are trading sharply higher.

“Argon makes a variety of signals intelligence, sensors, electronic warfare and sonar as well as other C4ISR” – DOD speak for “Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance” – “products and services for the U.S. and international military markets. In our group we believe it is most comparable to Applied Signal and Mercury.”

He notes that Argon is being acquired for 13x EBITDA; as of yesterday’s close, Applied was at 7.1x forward 12 months EBITDA, with Mercury at 6.5x

“M&A is common in the space, but more so in times when the top-line is pressured,” he writes. “For the large companies, working capital needs decline, mix becomes richer and cash flow grows far beyond internal needs. Acquisitions are used to bolster growth and find a productive use for the cash. The multiples of smaller companies benefit from the higher relative growth as platforms are upgraded and from the acquisition support.” The stocks in the group are cheap, he contends, and fundamentals are improving.

In today’s trading:

• Argon is up $9.91, or 40.6%, to $34.34.
• APSG is up $1.50, or 8.2%, to $19.70.
• MRCY is up 88 cents, or 8%, to $11.88.

Western Digital Bouncing Back

Western Digital (NYSE: WDC  ) had a terrible time last year as the company saw its manufacturing facilities -- along with its dominant market share -- washed away by floods in Thailand. Its largest rival, Seagate (Nasdaq: STX  ) , on the other hand, saw its own manufacturing facilities escape relatively unscathed.

But Western Digital is chalking a comeback with the proposed acquisition of Hitachi's (NYSE: HIT  ) hard-drive business; however, the deal is waiting on regulatory approval and is on hold for anti-monopoly reasons. This is where the deal with Toshiba comes in.

Deal time
According to the agreement, Toshiba would acquire WD's 3.5-inch hard-disk intellectual property and manufacturing equipment, including a Hitachi GST manufacturing facility in China. This would hand Toshiba the opportunity to produce 3.5-inch hard-disk drives for desktop computers, servers, and consumer electronics apart from its specialization in 2.5-inch laptop hard drives.

In return, Western Digital would take over Toshiba's stricken hard drive manufacturing facility in Thailand.

The devil is in the details
Now, I know what readers might be thinking, and no, Western Digital did not give so much of its stuff to Toshiba out of sheer goodwill. This deal is just a part of a larger agenda to gain market share significant enough to allow it to compete with Seagate.

Regulators were of the opinion that the combination of WD and Hitachi would lead to a duopoly in the memory market, and required that WD dilute its memory business sufficiently with a third player to create a balanced playing field. Hence the Toshiba deal. Western Digital stands to gain in a big way if these deals go through. How much? Let's see.

As of the fourth quarter of 2011, according to research firm IHS iSuppli, Hitachi Global Storage Technologies (HGST) held a market share of 14%, while that of Western Digital's was 23%. So, if Western Digital manages to acquire HGST, it could gain a significant share of the hard-drive market.

But it's not all in black and white: Western Digital would have to revive the flood ravaged 2.5-inch hard-drive facility it's supposed to acquire. And since the company is divesting a part of its 3.5-inch hard-drive manufacturing facilities in exchange, a near-term hit in market share would be expected. But in the long run, HGST would certainly give Western Digital a significant edge in the hard-drive space.

But what about Toshiba?
Well, I hate to burst Toshiba's bubble, but at the end of the day, the hard-drive business isn't all about diversifying into different products. Toshiba might be able to make 3.5-inch drives, but it also has to generate profits in an industry where margins are thin and competition is cutthroat.

The disclaimer�
If Western Digital fails to get final regulatory approval by March 7, the company would have to pay a termination fee of $250 million to HGST. So I'd suggest a wait-and-see approach until we have some clarity about the regulatory proceedings.

You can keep a close tab on Western Digital's progress by adding it to your Watchlist. Don't worry, it's free and it lets you stay on top of the latest news and analysis of your favorite companies.

Who Wins If Nokia Outshines the iPhone?

I bring an unaccustomed wine
To lips long parching, next to mine,
And summon them to drink.
-- "I Bring an Unaccustomed Wine" by Emily Dickinson

To Finnish phone giant Nokia (NYSE: NOK  ) , a hero's welcome to America would be as welcome as the unaccustomed wine in today's National Poetry Month tribute. The company is orchestrating a huge launch together with two big partners that just might end Nokia's effective drought on our shores.

Have you seen the Lumia 900? If not, you will soon enough. Launch partner AT&T (NYSE: T  ) will put its back into giving the flagship smartphone a proper launch in America.

I don't see any other way to interpret what Ma Bell's senior VP of devices, Jeff Bradley, is saying. In a recent interview with CNET, Bradley promised serious support for Nokia's big release: "At all levels, this is a notch above anything we've ever done," he said, and that includes every Apple (Nasdaq: AAPL  ) iPhone launch ever. "Before you walk in to the store, you know this is our hero phone. We're going big. We're really bullish."

The launch will include a huge TV ad campaign just as broadcasters slide into the so-called sweeps season with highly anticipated season finales aplenty. AT&T and Nokia have trained store employees to push the device, most likely with direct help from platform provider Microsoft (Nasdaq: MSFT  ) . And as Bradley said, you'll see a barrage of signage promoting the Lumia 900 as the official launch day comes up on April 8.

Oh, and you can get a Lumia 900 for the attractive price of free if you're new to Ma Bell. That price point could make a huge difference.

Yes, the launch it timed to hit the Easter weekend. While not exactly Black Friday, any holiday gets shoppers out to the malls.

So yeah, this is a big deal. Nokia needs a big hit after suffering through years of indifference from American networks and, hence, American consumers. Microsoft needs the Lumia 900 to succeed as an official relaunch of the Windows Phone brand. No, it's not the first Windows Phone model on the market, but it's certainly the first to get a serious retail push.

The big surprise here is, of course, AT&T's enthusiasm. The network jealously guarded its exclusive iPhone relationship with Apple for years. Android, BlackBerrys, and other smartphones always looked like second-class citizens in an AT&T store. So it's a bit jarring to see such a strong campaign for a whole 'nother smartphone brand here.

If Bradley's brash words about outdoing even the spectacular iPhone 4S launch holds true, we might finally have a third serious competitor to the cemented iPhone/Android duopoly.

And there's a surprise winner hidden inside these phones, too: The Lumia 900 sports a decently sized OLED display, and Nokia has a history of sourcing these brilliant, power-sipping panels from Samsung Display. While this hardly moves the needle for Sammy, that company in turn incorporates technology from Universal Display (Nasdaq: PANL  ) , which gets paid by the pound for the needed materials. So if the Lumia 900 turns out to be a big winner with millions of units sold, Universal Display reaps some of the rewards. And for this small-cap company, that is enough to make a serious difference.

The smartphone wars are heating up as Microsoft, Apple, and the Android camp stake their claims on an exploding trillion-dollar market. Learn all about this highly investable trend in a special report, yours for the asking but only for a limited time.

SM: Taxes on Options: Puts and Calls

FOR individual investors out there dabbling in stock options for the first time, you need to know how these securities get taxed.

For advice on those, see "Taxes on Incentive Stock Options" and "Avoiding the AMT When Exercising ISOs No, this time we're talking about people who are using puts to lock in their profit on an IBM and calls to wager on the continued climb of the latest stock-market darling.

For the uninitiated, lets start with some definitions. A put option gives the "holder" (the option owner) the right to sell a specified publicly traded stock at a set price ("strike price") on or before a specified date. A call option, on the other hand, gives the holder the right to buy a security at a set price.

Now if instead of buying an option, you grant someone else a put or call option, you are an option "writer." As such, you receive a "premium" (fee) from the holder in return for taking the risk.

As a holder, you can acquire your option either by paying a premium to a writer for a newly issued option or by purchasing an existing option on the open market.

Now for the tax rules:

Option Holders If you hold options, they will either: (1) expire unexercised on the expiration date because they are worthless, (2) be exercised because they are "in the money" or (3) be sold before they expire.

If your option expires, you have obviously sustained a capital loss usually short term because you held the option for one year or less. But if it was held longer, you have a long-term capital loss. For example, say you buy a six-month put option with a strike price of $10 per share. On the expiration date the stock is selling for $20. If you have any sense, you'll let the option expire and thereby incur a short-term capital loss. Report the loss which is the price (or premium) you paid for the put, plus transaction costs on Part I of Form 8949, which feeds into Schedule D, by entering the option-purchase date in column (c), the expiration date in column (d), "expired" in column (e), and the cost, including transaction fees, in column (f).

If you exercise a put option by selling stock to the writer at the designated price, deduct the option cost (the premium plus any transaction costs) from the proceeds of your sale. Your capital gain or loss is long term or short term depending on how long you owned the underlying stock. Enter the gain or loss on Form 8949, just as you would for any stock sale.

If you exercise a call option by buying stock from the writer at the designated price, add the option cost to the price paid for the shares. This becomes your tax basis. When you sell, you will have a short-term or long-term capital gain or loss depending on how long you hold the stock. That means that your holding period is reset when you exercise the option.

For example, say you spend $1,000 on a July 12, 2011, call option to buy 300 shares of XYZ Corp. at $15 per share. On July 1 of 2011, it's selling for a robust $35, so you exercise. Add the $1,000 option cost to the $4,500 spent on the shares (300 times $15). Your basis in the stock is $5,500, and your holding period begins on July 2, the day after you acquire the shares.

If you sell your option, things are simple. You have a capital gain or loss that is either short term or long term, depending on your holding period.

Option Writers As mentioned, option writers receive premiums for their efforts. The receipt of the premium has no tax consequences for you, the writer, until the option: (1) expires unexercised, (2) is exercised or (3) is offset in a "closing transaction" (explained below).

When a put or call option expires, you treat the premium payment as a short-term capital gain realized on the expiration date. This is true even if the duration of the option exceeds 12 months. For example, say you wrote a April 5, 2011, put option at $25 per share for 1,000 shares of XYZ Corp. for a $1,500 premium. This creates an obligation for you to buy 1,000 shares at a strike price of $25. Fortunately for you, the stock soars to $35, and the holder wisely allows his option to expire. You treat the premium as a $1,500 short-term capital gain. Report it on Part I of Form 8949 as follows: Enter the April 6, 2010, expiration date in column (c), the $1,500 as sales proceeds in column (e), "expired" in column (f). If you wrote the option in the year before it expires, there are no tax consequences in the earlier year.

If you write a put option that gets exercised (meaning you have to buy the stock), reduce the tax basis of the shares you acquire by the premium you received. Again, your holding period starts the day after you acquire the shares.

If you write a call option that gets exercised (meaning you sell the stock), add the premium to the sales proceeds. Your gain or loss is short term or long term, depending on how long you held the shares.

With a closing transaction, your economic obligation under the option you wrote is offset by purchasing an equivalent option. For example, say you wrote a put option for 1,000 shares of XYZ Corp. at $50 per share with an expiration date of July 12, 2011. While this obligates you to buy 1,000 shares at $50, it can be offset by purchasing a July 12 put option for 1,000 shares at $50 per share. You now have both an obligation to buy (under the put option you wrote) and an offsetting right to sell (under the put option you bought). For tax purposes, the purchase of the offsetting option is a closing transaction because it effectively cancels the option you wrote. Your capital gain or loss is short term by definition. The amount is the difference between the premium you received for writing the option and the premium you paid to enter into the closing transaction. Report the gain or loss in the tax year you make the closing transaction.

Straddles For purposes of deducting losses from options, the preceding rules apply to so-called naked options. If you have an "offsetting position" with respect to the option, you have a "straddle." An example of a straddle is when you buy a put option on appreciated stock you already own but are precluded from selling currently under SEC rules. Say the put option expires near the end of the year. If you still own the offsetting position (the stock) at year's end, your loss from the expired option is generally deductible only to the extent it exceeds the unrealized gain on the stock. Any excess loss is deferred until the year you sell the stock. See IRS Publication 550 for more on straddles.

How to Earn 26.5% on $20,000

Let's see if this describes your investing strategy during the past few years:

In 2008, you got out of the market, but only after your retirement account lost 35%. Then, even after the market started to rally, you just couldn't pull the trigger to get back in. The memory of those sleepless nights was still too fresh.

  But sitting on the sidelines hasn't been without pain. As the market rebounded, your money-market fund paid an averaging between 0.05% and 0.07% in the years after the recession, meaning you were on pace to double your money in roughly 1,000 years. Savings and CD rates were only slightly better.

If this describes what you went through, then don't worry. You're not alone. As of mid-April, more than $2.5 trillion dollars sat in stingy yielding money-market mutual funds.

But it doesn't have to be that way. I have a way to earn considerably more on your cash...

Millions of investors, one simple solution
In the past I asked some of my Daily Paycheck subscribers about their investing experience over the past few years...

Turns out, many of them were in the same boat. They used words like "burned," "scammed," "devastated," and "lost my butt" to describe their fallout from the dreadful 2008 market. Two readers specifically mentioned taking a 50% hit on their retirement accounts. And they complained about the "measly" yields their sidelined cash was earning.

But there was some good news.

I was happy to see that many people said the strategy behind The Daily Paycheck gave them the confidence to finally get back in the market. And I was truly impressed by their results so far. (One subscriber told me he earned $4,004.14 in dividends in 2010. Another said he was up 35%.)

Now, no strategy or investment is without risk. But the "Daily Paycheck" strategy focuses on solid, dividend-paying securities to provide steady income streams. And if you have just a little time on your horizon, then reinvesting those dividends can grow the streams into rivers.

For instance, my readers who invested in the conservative Reaves Utility Income Fund (NYSE: UTG) received 27% more income in April 2012 than they did in December 2009 -- just by reinvesting the dividends. Including capital appreciation, UTG had total returns of 23% since I first added it my portfolio in December 2009 ... and that's on a utility fund.

Meanwhile, the income my subscribers will receive this month from one of my newsletter's master limited partnerships (MLPs) is 25.5% higher than it was in December 2009. So far, the total returns from that investment are over 60%.

The market rally might be fizzling, but that won't stop income growth
This year, the market has been an up and down rollercoaster. And maybe you're worried that you waited too long to get back in. But the beauty of a strategy that uses dividend reinvestment is that your income continues to grow, even when the market doesn't.

The chart to the right shows your potential annual income stream assuming a $20,000 initial investment in securities with an average yield of 7%. Thanks to the power of reinvested dividends and dividend growth, after 10 years your portfolio could be generating $5,299 in annual income -- that's 278.5% more income when compared to an investor who doesn't reinvest. In fact, it could be generating an effective yield of 26.5% based on your initial $20,000 investment.

If you have even a little bit more time on your investment horizon (or more money to invest, or additional dollars to invest each year), then the numbers only get better. And keep in mind that these are conservative estimates. They don't include one penny of capital appreciation.

No one should have to wait 1,000 years to double their money. And now may not be the best time to plow all your money into high-risk stocks. But there is another alternative.

Advisors at Raymond James Boost Sales in November

Raymond James Financial (RJF) said Wednesday that its advisor fees and commissions grew 3% sequentially in November to $172 million, though they were flat versus the same month last year.  

Assets under administration fell 1% sequentially in November to $268 billion but grew 6% year over year. Its assets under management, $34.7 billion, were flat in November versus October, though they grew 10% from November 2010.

“The changes for the month are in line with the modest 0.5% decline in the S&P 500 for the month of November,” the company reported.

“The market environment remains challenging due to volatility as investors continue to digest the daily up and down news of the world economy,” said CEO Paul Reilly, in a statement. “The month of November showed improvement over the prior month, although the uncertainty in the market has dampened activity.  Securities commissions and fees increased 3% over last month and were flat with last year.”

The company said that its equity and fixed-income capital markets businesses improved from October. The number of lead-managed equity offerings, totaling eight, “rebounded to the level of the prior year as our energy sector was particularly active,” according to Raymond James. Net loans at Raymond James Bank were flat in November vs. October, but they grew more than 11% from last year.

“In general, we are pleased with the consistency of our metrics, but the markets remain quite volatile and investor apprehension is still at an elevated level,” noted Reilly. “Accordingly, we remain cautious in the near term about our ability to compare favorably to the prior year results.  However, we remain confident about our long-term future as we continue to be opportunistic in our hiring during this time of uncertainty.”

Raymond James has about 5,400 advisors in the U.S. and abroad. Recently it has recruited a number of advisors and teams from the wirehouses, including  a former-Merrill Lynch (BAC) team that joined it on Tuesday with $250 million in assets

Currency Trading:DGCX begins trading in Indian rupee options – Khaleej Times

Moneycontrol.com

DGCX begins trading in Indian rupee options Khaleej Times DUBAI � Dubai Gold and Commodities Exchange, or DGCX, started trading on its newly launched Indian Rupee Options Contract on Monday to become the only exchange outside India to offer trading in both futures and options in the Indian currency. … Indian Rupee Recovers As Euro Zone Sentiment ImprovesWall Street Journal Rupee Decline in 'So Short a Time' a Concern, Gokarn SaysBusinessWeek RUPEE: Weak Alongside Regional PeersIndia Infoline.com Times of India -Emirates 24/7 -Livemint all 125 news articles »

{fcurrency trading} – Forex News

Investing 101 — When to Change a Financial Adviser

It has been my experience that most individuals, once they make a financial decision, stick with it. No matter what the performance, people have a difficult time changing course. Wall Street loves that fact because financial advisers sometimes can make money despite poor performance.

In the business, they call this �sticky assets.” But if the same work that goes into hiring a professional adviser went into the evaluation of an adviser along the way, sticky assets would cease to exist.

While I do not believe in knee-jerk reactions, especially in relation to performance, I do think there are perfectly good reasons to change advisers. One of the biggest reasons — customer service — has nothing to do with performance.

If you find that your adviser has disappeared on you and is not available to answer difficult questions, it might be time to make a change. If an adviser is dismissive of your concerns, make a switch. I don�t want to be an alarmist, but if you look at those that previously perpetrated financial frauds, being dismissive of customer complaints is part of the modus operandi.

It simply is bad form to ignore a client’s concerns. You pay good money for your financial adviser’s time, and thus you deserve the best possible treatment. If you aren�t getting the best treatment, it is time to find a new adviser.

But don’t ignore performance. Bad performance certainly should be a catalyst for a change. But instead of a quick reaction, only make a switch after multiple quarters of performance that fail to meet your goals and objectives. This could be difficult if your relationship with your adviser is friendly. Nobody wants to fire a friend, but that’s exactly what you must do if your friend is failing you.

A final reason to change is too much success. This might be counterintuitive, but if your adviser is becoming a star, it might be time to move on. Adding too many clients puts pressure on the adviser. Time with you might be reduced as the adviser works with a glut of newer customers.

Even worse is if the adviser begins pawning your account off on a junior adviser. You deserve top-notch service — or at least the maintenance of the service you previously received — and if you don�t have access to the adviser because of time constraints, consider moving on. The timing might end up being perfect, as peak performance tends to go in cycles. Much like selling a stock at the top and buying at the low.

Netgear Beats Up On Analysts Yet Again

Netgear (Nasdaq: NTGR  ) reported earnings on Feb. 7. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Netgear met expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue increased significantly and GAAP earnings per share expanded significantly.

Gross margins dropped, operating margins improved, net margins increased.

Revenue details
Netgear logged revenue of $309.2 million. The eight analysts polled by S&P Capital IQ expected a top line of $306.9 million. Sales were 20% higher than the prior-year quarter's $258.5 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS details
Non-GAAP EPS came in at $0.69. The eight earnings estimates compiled by S&P Capital IQ averaged $0.62 per share on the same basis. GAAP EPS of $0.60 for Q4 were 62% higher than the prior-year quarter's $0.37 per share.

Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 30.7%, 90 basis points worse than the prior-year quarter. Operating margin was 10.9%, 100 basis points better than the prior-year quarter. Net margin was 7.4%, 210 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $314.1 million. On the bottom line, the average EPS estimate is $0.65.

Next year's average estimate for revenue is $1.33 billion. The average EPS estimate is $2.75.

Investor sentiment
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 2,270 members out of 2,342 rating the stock outperform, and 72 members rating it underperform. Among 776 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 770 give Netgear a green thumbs-up, and six give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Netgear is hold, with an average price target of $40.38.

The game is changing for makers of communications equipment, and some of the old guard may not make it. Where will Netgear fit in? Who's going to lead going forward? Check out "3 Hidden Winners of the iPhone, iPad, and Android Revolution." Click here for instant access to this free report.

• Add Netgear to My Watchlist.

Will Splitting These Stocks Make Them More Valuable?

Fools know the value of a stock split: zero. It's a non-event. Instead of a $20 bill in your wallet, you now have two $10 bills. So if they mean nothing, why do them? There are a few reasons, none of which has anything to do with whether the stock is a good investment. Here are the usual ones:

• To make�the stock�look cheap.
• To increase liquidity.
• To meet stock-exchange listing requirements.
• To express a bullish management sentiment. �

Regardless of the reason, though, markets tend to view splits as positive events, and a company's shares can get a short-term boost from the news. But if the company isn't a good, long-term business, it doesn't matter if its shares split, or whether you buy them before or after.

That's why we pair up stock-split announcements with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best stock pickers think a company's long-term potential is outstanding, and the company is giving off bullish signals, maybe then investors should take notice.

Here are two stocks that recently announced their intention to split their shares.

Stock	�CAPS Rating (out of 5)	Split Ratio	Pay Date	Current Share Price
Cemig (NYSE: CIG  )	***	5:4	May 11, 2012	$17.54
FMC (NYSE: FMC  )	***	2:1	May 24, 2012	$103.99

Don't blindly buy into a split -- you still need to do some research. Use the announcement as a jumping-off point to determine whether its shares are two or three times as good as before.

Drink up!
While the natural gas industry in the U.S. is in a deep state of depression, with prices still trading at historic lows and inventories at historic highs, it's not the same elsewhere in the world, where producers can still command higher prices for their output. Brazilian utility operator Cia Energetica de Minas Gerais, or Cemig, recently acquired natural gas assets from supplier Gasmig and plans to start drilling its own wells because demand is so great. But even those plans could be upset by the tumult in Europe as Greece plans to exit from the eurozone. Global energy prices have weakened in the wake of the recent elections, which heightened worldwide financial risk, and oil prices remained below $95 a barrel.

Yet 97% of the electricity it generates comes from hydroelectric power, which ought to benefit from continued economic expansion. Despite spasms of upheaval elsewhere, Brazil has maintained its position as a stalwart of growth though even there cracks are appearing. The government now believes the economy will expand less than the 4.5% rate previously forecast for this year, perhaps just achieving the 2.7% rate it notched in 2011.

Cemig expects total energy distribution to reach as high as 53.8 terawatts per hour by 2015 and is putting most of its resources into the distribution portion of its capex spending plan.

But what probably attracts most investors to Cemig is its dividend, currently yielding 3.4%. While fellow Brazilian dividend payer Vale (NYSE: VALE  ) may pay more (5.7%), the steady-state nature of the utility is what appeals to CAPS member Porcus, who sees it stable across a number of metrics: "good yield, low p/e, high margin, low PEG, high return on equity."

Add the Brazilian utility to�your watchlist�to see if it can keep up its expansion even if the country's economy slows as expected.

A special niche
Brazil's economic drive was also evident in an unsuspecting place: the earnings results of chemical manufacturing outfit FMC, which saw its agricultural chemicals division enjoy a 32% jump in revenues as its Latin American segment -- primarily because of a strong finish to Brazil's sugarcane and cotton season -- surged 44% higher over the year-ago period.

Unlike other specialty chemicals makers such as Huntsman (NYSE: HUN  ) or Kronos Worldwide (NYSE: KRO  ) , FMC doesn't gain any benefit from titanium dioxide, which has seen prices soar, resulting in greater profits for the producers. Rather, FMC's specialty is biopolymers that are used in food ingredients used to enhance texture, color, and structure, along with lithium for energy storage systems. Whether we'll see lithium enjoy the runaway pricing TiO2 is currently experiencing, FMC notes supplies of it are tightening and that's having an impact on volumes sold.

With 96% of the more than 400 CAPS members rating FMC thinking it will outperform the broad market indexes, it's clear they believe it has a special inside track to growth moving forward. Add the chemical manufacturing company to the Fool�s free portfolio tracker, then let us know on the FMC CAPS page if the potential for higher prices will make it special enough for your portfolio.

Split the difference
Head over to the completely free CAPS service and let us hear what you've got to say about these or any other stocks that you think we should split hairs over. And if you're looking for dividend-paying stocks to balance out your portfolio, check out The Motley Fool's free report "2 Dirt Cheap Stocks With HUGE Dividends." You can be among the first to get analysis of a market leader in payment systems and a high-yielding energy company by accessing this just-released report. Simply�click here -- it's free.

How Long-Term Investments Can Benefit You

In uncertain times, with markets usually volatile, it is tempting to make long-term investments and hope to ride out any economic storms.

There are advantages and disadvantages to all types of investment terms so what are the specific benefits of Long-Term investments.

The most obvious benefit of long-term investing is compounding. This is the effect of dividends or interest being reinvested to achieve sustained Capital Growth.

If investing on a regular basis, this equates to cost averaging. This means that you may purchase shares or units monthly for example and the cost of the units will differ short-term but as long as the overall investment increases long-term then any troughs or peaks are smoothed.

What about a lump sum long-term investment?

In this instance you are hoping that the investment increases over the long run to achieve capital growth or any income derived will outweigh capital depreciation. However, what if the investment actually grew over the long term, GUARANTEED.

If you think about it how many investments can you think of that physically grow and offers huge demand and markets.

For a long-term and stable investment, you couldn’t do much better than an investment in Timber. When other investments have been heading down hill, timber remains a solid investment opportunity for the savvy investor. If you look at the return on investment figures for the last forty years, timber comes out as a top performer when measured against many other asset classes.

So how does a forestry investment work?

Usually, an investor will commit a lump sum. This will purchase saplings, fund the land lease, pay commissions and forester/management fees. The saplings are planted and they start to grow. Initially, the saplings are worthless but as time passes the young trees start to gain in value. Weaker trees will be harvested for paper pulp to allow the stronger trees to become more established. Usually, this first harvest will happen within the first five years. The income the harvested trees return will be passed to the investor as an income payment. The remaining trees continue to grow and all the time they increase in value. Further harvests will take place until the investor is left with high value, strong mature trees.

Please allow me to take you through a scenario. For example, an investor initially purchased 600 saplings. After year 4, 300 trees are harvested (returning £5000 in income). After year 8 a further 105 trees are harvested (returning £15,000 in income). After year 10 a further 68 trees are harvested (returning £20,000 in income). To this point £40,000 had been returned in income.

For argument sake, lets me make the assumption that a mature Melina tree (Gmelina Arborea) is currently worth £250 each and over a 12 year cycle the price increased by 5% per annum, a mature Melina tree would be worth £453 approximately.

Therefore, 127 trees would remain after 12 years and harvested. Returns would be 127 X £453 = £57,531. On this basis the overall return would be £97,531 for an initial investment of… £18,000.

Now what if I was to inform you Gmelina has risen in value 2005-11 on average 17.83% per annum.

As a long-term investment option, various bodies predict strong growth for the timber industry and for the foreseeable future. In the UK alone we use 50% more natural resources per person than what nature can replenish. When you weigh-up the long-term nature of timber an investment today is an interesting option to help secure your financial future and maybe even that of your heirs.

Alternatively, if you are looking for UK Pension investment, forestry may just provide the returns you need to start in building your financial security for the later years in your life.

Whatever way you look at it, investment in timber is a solid financial choice.

Always seek advice from a qualified professional before committing to an investment.

At silvinvest we highlight several superb sustainable Forestry Investments. Register at http://www.silvinvest.co.uk to gain access to the Sales Brochures and interact with our Potential Returns Calculator.

Silvinvest is an information and business development website.

CHART: Why Silver is Likely to Pass $150

In a previous article, I wrote about the shift to measuring wealth in ounces instead of Dollars. In that same article, I expressed my opinion that I consider silver bullion to be one of the best current opportunities to increase one’s gold ounces.

Here, I would like to point out some interesting signals on the long-term chart for silver.

Below, is a long term chart for silver:

On the chart, I have highlighted two fractals (or patterns), marked 1 to 4, which appear similar. What makes these two fractals so special is the similarity of the circumstances in which they exist.

There was a significant peak in the Dow (1973 and 2007) between point 1 and 2 of both fractals. Both peaks in the Dow came about 7 years after the peak in the Dow/Gold ratio. After point 2, on both fractals, the oil price made a significant peak (1974 and 2008), about 8 years after the peak in the Dow/Gold ratio.

Thanks to this similarity in events, as well as the similarity in sequence, I was able to identify the great possibility for significantly higher silver prices, back in October of 2010. This was a very clear signal that higher silver prices were coming, and that is exactly what we got, when silver moved to $49. However, this run is not over yet. The move from $17, when silver broke out of the triangle (at point 3 of the second fractal) to $49 was just the first part of the move. In my opinion, the biggest and best part of this move is still ahead. In various previous articles on silver, I have presented a lot of evidence to support my opinion for higher silver prices over the coming years.

Based on the fractals on the chart, we could still have about two years before we could get a top like we had in 1980. That is 14 years after the Dow/Gold ratio top (beginning of 1966 to the beginning of1980 vs the end of 1999 to the end 2013).

From a price point of view, there is also an indication that this move is not over yet. If the two patterns indicated continue their similarity, it would be reasonable to expect the final top of the current pattern to higher than $150. Why? If you measure the price movement from point 1 to point 2, in the first pattern, and compare it to the price movement from point 4 to 5, in the first pattern, you will find that the movement from point 4 to 5 is at least 7.6 times larger.

Currently, the movement from 4 to the $49 in April of 2011 is only about 1.65 times larger than the movement from point 1 to 2. If it follows the first pattern, and grows at least 7.6 times greater, it will comfortably pass $150.

*Post courtesy of Hubert Moolman, a gold and silver analyst, specializing in fractal analysis as well as the fundamentals of gold silver. He offers a newsletter service, which provides research to investors from various countries, including: USA, UK, Europe, India and Australia. His work is regularly published on the established precious metals sites. 

You can read more at http://hubertmoolman.wordpress.com/ and reach him at hubert@hgmandassociates.co.za

 

Detroit Auto Show: Hits and misses

FORTUNE -- Detroit's big auto show that opened on Monday is being called a big success. Exhibits at the show went through a model change and are all-new; more new cars and concepts are being unveiled for the first time; and statuesque female presenters, deemed to be in poor taste during the recession years, have returned in numbers to display stands to attract male buyers.

But just as in life, Detroit has not been a win-win for everyone. The auto show is a demanding environment with thousands of journalists on the ground looking for stories, and hundreds more analysts and insiders available to generate spin and pass gossip. Mistakes in strategy, sensibility, or execution are inevitable in the hothouse environment. Herewith, some notable hits and misses from the 2012 North American International Auto Show:

Detroit

Hit: The weather. Unlike past shows held in bitter cold and blinding snowstorms, Detroit was baked in sunshine and above-freezing temperatures. Everybody noticed and applauded the difference, and the show activities ran more smoothly.

Miss: Despite the balmy temperatures, there was no avoiding the evidence that the improving fortunes of the domestic automakers have not radiated to the city at large. Surrounding every glittering new casino or office building were vacant land and surface parking lots -- stark evidence of slack economic activity and a declining population.

Cobo Center

Hit: The city has embarked on a major upgrade and expansion of its convention center, and in the interim, it has upgraded service in the existing hall. Most notable was the improvement in the quality of the meals served at events; instead of cold cuts and cheese cubes, attendees could sample fresh salads, hot chicken pot pie, and home-baked-style cookies.

Miss: The restrooms. Despite apparent efforts to keep up with heavy usage during the show's hours, tile floors were frequently awash with water, waste bins overflowed, and paper towels were in perpetual short supply.

Honors

Hit: The 2013 Ford Fusion, unveiled at 8 a.m. on the first day of the show, was widely praised for its surprising selection of engines -- five, including a hybrid and a plug-in hybrid -- that will have fuel economy ratings of up to 100 mpg.

Miss: The 2012 Ford Focus, which was passed over for North American Car of the Year recognition in favor of Hyundai's Elantra and whose sluggish sales are being surfaced in news reports.

Engineering

Hits: The Cadillac ATS, built on an exclusive new lightweight chassis that, with rear-wheel-drive and just 3,400 pounds of avoirdupois, can go head-to-head -- at least on the spec sheet -- with the BMW 3-series.

Miss: The Buick Encore, built on a chassis that it shares with the Chevrolet Sonic, revived memories of earlier Buicks that borrowed engineering from other brands as it moved its model offerings to lower price points. Can anyone say "Skyhawk," "Rendezvous," "Rainier," or "Terraza?"

Parties

Hits: Cadillac threw a splashy event worthy of the 00's for the unveiling of the ATS on the 11th floor of the spacious College for Creative Studies Taubman Center. The A-list crowd supped on small plates ranging from lobster concoctions to sausage rolls, while North American president Mark Reuss introduced the ATS and then amiably withstood a crush of would-be interviewers.

Misses: Volkswagen, which aims to be the largest auto company in the world, tried to cram the largest number of guests into the smallest possible space when it hosted a late-night event in a noisy, steamy downtown saloon. The scene outside was equally discordant. Even though VW has called off its planned merger with Porsche due to legal problems, a fleet of Panameras parked at the door looked shockingly out of place in the shabby neighborhood of abandoned storefronts.

Most surprising product trend

Hits: Luxury SUVs Blame it on the success of the Porsche Cayenne. Luxury and luxury-aspiring manufacturers continue to roll out SUVs, and the bigger they are, the better. Maserati displayed a version of its new Kubang, based on a Jeep Grand Cherokee and built in Detroit, of all places. Bentley declared its intention to enter the fray ASAP with its contender, which will have three rows of seats. Meanwhile Infiniti showed off its all-new JX35 that features three rows of seats plus a backup collision intervention system. It goes on sale this spring. Finally, Lexus unveiled a revised version of its durable LX 570 with seating for eight. Anybody for a safari -- or a trip to the shopping mall?

Misses: EVs Nearly every manufacturer had an electric vehicle to introduce, but the applause was muted, and the buzz was lacking. Slack sales of the Nissan Leaf and the Chevy Volt have chastened enthusiasts. Like the showbiz ingénue who slumps after her first big hit, EVs may have suffered from premature celebrity and are not quite ready for prime time.

Management

Hits: Overseas top executives made a strong showing in Detroit, with VW's Martin Winterkorn, Daimler's Dieter Zetsche, Fiat-Chrysler's Sergio Marchionne, and Nissan-Renault's Carlos Ghosn all submitting themselves to print journalists at formal question-and-answer sessions. The formats allowed for more thoughtful responses and generated some real news, such as Marchionne speculating on another wave of industry consolidation in Europe with the creation of a "second VW group" to compete against the Wolfsburg giant.

Misses: Ford's Alan Mulally and GM's Dan Akerson were less available, appearing mostly in messy scrums after product reveals, which more resemble piles of linemen falling on a fumbled football than anything like the communication of useful information.

Attendees

Hits: The power players at this year's show -- the superbuyers -- demonstrated their clout by staying mostly undercover. They are the heads of the big publicly owned dealer groups -- AutoNation's Mike Jackson, PAG's Roger Penske, and Group 1's Earl Hesterberg -- who buy cars in the tens of thousands annually and wield enormous influence in the design, marketing, content, and pricing of new models.

Misses: Every year, there is a new crop of self-appointed analysts trying to join the ranks of those whose opinions are quoted in newspaper articles and digital dispatches, only to discover there is a difference between having an opinion and having an informed opinion.

Social rituals

Hits: Mulally's bro hug with Ford Executive Chairman Bill Ford at the Fusion introduction. In its transparent demonstration of confidence, support, and yes, affection, it seemed to symbolize the open style of leadership that Mulally has brought to the company and that has led to its success.

Misses: Nearly everybody else. 

Top Stocks for 2009 – How Are They Doing?

Stocks powered forward in the third quarter, even as investors feared Economic Apocalypse Part II was just around the corner.

It was not. Instead, an economic recovery took hold, and investors bid up stocks on signs of a return to corporate profit growth. So much for that double-dip recession. The economy is doing just fine, thank you. As a result, most investors are playing catch-up, hoping to buy stocks before the run ends.

This chase has more than just legs, it has rocket boosters. While the little guy remains entrenched on the sidelines, the institutional investors, some of whom were aggressively short, are now buying stocks en masse. It is this buying, which was mostly unexpected, that has allowed the major indexes to move significantly above the lows established in March.

The unexpected nature of the move supports my own suggestions at the start of the year for investors to follow an absolute return strategy with respect to the markets. Not knowing if stocks would rise or fall made a strong case for investors being both long and short. In a market of uncertainty and volatility, such an approach can generate positive returns while minimizing risk. Done well, the strategy can propel a portfolio significantly higher.

How Our Top Stocks Have Fared

In the case of my own Top Stocks to Buy and Sell for 2009 we have been ahead of the game from day one. When the market was up, my buys have outperformed the major indexes, and when stocks were down at the start of the year, the shorts dropped like a rock.

The combination, along with some timely short covering in late February, has left us with 10 longs and seven shorts. Since the March bottom, the long recommendations have been on fire, recording a composite gain of more than 30% in 9 months. Considering the S&P 500 is up only 17% during the same period, our stocks are doing significantly better.

Here is an update on how each selection is performing including some thoughts on where we go from here.

Top Stock #1 – Jacobs Engineering (JEC)

The Republicans will tell you that none of the stimulus money has been spent thus far. If that is the case, one would expect Jacobs Engineering (JEC) to be doing poorly this year, and that has certainly been the case. Shares are down more than 4% as of the end of the third quarter.

JEC was on this list as a result of the 2008 elections and the supposed emphasis on infrastructure spending in the United States. With little actually being spent on infrastructure, construction firms like JEC have had a tougher go of it than expected. Even worse, investors who may have bid up shares in advance of the election are likely to be sellers the longer they wait.

The bias on JEC is to the downside until the economy roars back to life or government spending becomes a reality. Shares are worth holding as there is talk of a second stimulus plan that perhaps might actually go to brick-and-mortar projects.

Top Stock #2 – Pulte Homes (PHM)

The supposed recovery in the housing market continues to be an on again/off again affair. For the most part, economic activity in housing was mostly positive in the third quarter, but there remains a healthy dose of skepticism about supply. Foreclosures are the biggest hurdle for the market. Increasing unemployment does not help matters. Prices have indeed fallen, but not far enough to really spur a boom in buying activity.

Until supply is absorbed, new construction will be dampened. Pulte Homes (PHM) was a Top Stock for 2009 as a long recession in housing was expected to end. So far investors are skeptical. Shares of Pulte are flat for the year through the end of September. Patience here is really a virtue. PHM is worth holding, as the sector is likely to recover eventually. Unfortunately for those, including me, hoping for a 2009 rally, 2010 may be the year.

Top Stock #3 – Chicago Bridge & Iron (CBI)

One of the biggest winners on the Top Stocks list has been Chicago Bridge & Iron (CBI). Shares have increased by more than 85% through the end of the third quarter on the strength of its niche construction projects. With liquefied natural gas terminals under construction, and the potential for growth in nuclear power across the globe, CBI has been an infrastructure play that is actually working. In fact, it is more than working. It has been a huge winner in 2009. Energy and most anything tied to energy have been doing well this year, as we transition from global contraction to global growth. In preparation for energy needs of the future, CBI’s book of business is likely to be full for many years to come.

At the current price of $20 per share, CBI trades for under 13 times December 2010 earnings. There is more growth to come on CBI, and I would not be surprised to see some of that growth occur in the fourth quarter. CBI should be a double by the end of the year.

Top Stock #4 – General Electric (GE)

General Electric (GE) finally brought itself to life during the third quarter. The stock had been a laggard for some time as it struggled with a weak economy and troubles in its GE Capital unit. The financial crisis made loans at GE Capital worth less, and frankly, difficult to value at all. Thankfully, the disaster in lending looks to be ending, as GE worked frantically to right its ship. After bottoming in March in the mid-single digits, GE has roared back to more than $16 at the end of the third quarter, nearly tripling in value. That impressive move, though, would be impressive if you bought shares in March. If you had started in GE at the beginning of the year, you would be just over break-even.

The point is GE has a long way to go before recovering lost value during the recession and financial crisis. Any future gains in the stock will have to be tied to earnings. GE will simply need to grow its way out of trouble. Given its history as a top innovative industrial powerhouse, I would bet on that recovery coming sooner than later.

Top Stock #5 – Chesapeake Energy (CHK)

Of course, anything tied to energy has done very well in 2009. The huge natural gas company, Chesapeake Energy (CHK), fits that description. Shares are up more than 75% in 2009, with more gains on the horizon. Oil and gas prices had been quite volatile in 2008, leading to a mispricing of assets across the category. Stocks like CHK were dirt cheap at the beginning of the year.

Today, looking forward, CHK is positioned to increase even further. The global economy is recovering, and with it, commodity prices are rising. In addition, the dollar has been in decline during the last several months, putting more pressure on prices. The benefactor of an inflationary environment will be commodity plays like CHK.

Of the stocks listed here, the energy plays make the strongest case for continued holding in 2010. Another double from current prices is certainly possible as economies across the world spring to life.

Top Stock #6 – Tesoro Corporation (TSO)

It has been a tougher go in the energy sector for the oil refineries. Wild volatility made profits in a very thin margin business hard to come by. The thought for 2009 was that volatility would be ending. In some ways, that has, indeed, occurred, but not before prices rallied sharply during the first half of the year. At the same time, inventories climbed and demand slipped. That is a dangerous combination for an oil refinery.

Despite the difficult operating conditions, refineries are indeed making a comeback in 2009. Tesoro Corporation (TSO) has climbed nearly 14% during the first nine months of the year. Not bad, but not great either. The market is doing better.

Frankly, I’m pleased with the results, considering. I would hold the stock for the remainder of the year, but I cannot see a scenario whereby refineries would be included in any stocks to own list for 2010.

Top Stock #7 – Transocean (RIG)

With global growth outpacing oil supplies, the demand for exploration and drilling is likely to be strong for the foreseeable future. No wonder then that Transocean (RIG) has been a big winner in the Top Stocks for 2009 list. Shares of RIG are up more than 81% through three quarters, and investors can expect that ride higher to continue. Many experts are predicting oil prices of $100 or even more. There are predictions for $200 per barrel oil by very credible experts. At those levels, RIG can be expected to approach $150 or higher, as it did when oil prices touched $150. The bottom line is that RIG is a cash cow, and that cash grows when oil prices rise.

However, I am concerned about oil prices flattening in 2010. If so, RIG’s gains in 2009 will likely be the high water mark. It would be tempting to ride the wave through 2010 and doing so would bring no shame, but I am turning my attention elsewhere for opportunities. That said, I would most definitely hold RIG for the rest of this year.

Top Stock #8 – Mosaic (MOS)

Not nearly as explosive as oil and gas, the fertilizer play has been quite fruitful in 2009. Mosaic (MOS) has generated a profit of 39% so far, significantly outperforming the market. The demand for more yields on less land will keep demand for fertilizer strong. The most likely scenario for MOS is that the company is bought by a larger player or nationalized by someone like China. The Chinese have a storied history in making more with less with respect to agriculture. Mosaic plays right into their hands.

I would not sell this stock until it passes $100 per share. There is more than a double remaining in gains as far as I am concerned. Get past this nonsense of a double-dip recession, and this stock will rocket higher. I would hold for the remainder of the year and possibly beyond.

Top Stock #9 – Fluor (FLR)

Like Jacobs Engineering, the lack of stimulus spending has hurt Fluor (FLR). Shares have moved a modest 13% higher in 2009 lagging the rest of the market. Giant construction projects require government spending or strong economic growth. A combination of both is a home run. So far we have neither. As a result, there is not much enthusiasm for shares of FLR. Of course, investing is all about patience, and when stimulus spending does run into strong economic growth, FLR will be a stock to own. Unfortunately, that has yet to occur and not likely to occur in 2009. Instead investors may need to hold this stock through 2010.

Personally, I’m convinced there are stronger growth stories to follow in 2010. I don’t want to dump FLR with a quarter to go in the year, but I wouldn’t get too excited about this position.

Top Stock #10 – Archer Daniels Midland (ADM)

If there is a mistake on the list of Top Stocks for 2009, it would be Archer Daniels Midland (ADM). I added the company to the list for exposure and diversification in the agriculture space. It would have been far wiser to stay in the fertilizer space instead. ADM has had a nothing year, with shares of the stock basically flat for the year through the end of September. Obviously, investors could have done better in any number of sectors, but that is the way it goes.

A list of 10 stocks barely offers enough diversification as it is, thus the addition of ADM in and of itself is not a bad thing. We more than made up for its flat performance with big gains in other stocks. I would keep ADM through the remainder of the year and that is it. ADM is not a stock to own or even consider holding during 2010.

Vistaprint Down to Underperform

We recently downgraded our rating on Vistaprint N.V. (VPRT - Analyst Report) from Neutral to Underperform. The rating on this online supplier of graphic design services was downgraded on a host of factors including muted guidance for fiscal 2012 and 2013, execution risk for a set of initiatives and stagnation in customer growth.

In its recently concluded fourth quarter 2011, Vistaprint reported adjusted earnings of 43 cents per share handily beating the Zacks Consensus Estimate of 32 cents per share. The company registered a 27% year-over-year growth in revenues to reach $208.8 million on the back of favorable foreign currency translation. Although management expects to achieve $2 billion in revenues over the next five years and targets an EPS CAGR of at least 20.0%, we remain cautious on the stock on several challenges going forward.

To facilitate the above-said growth, Vistaprint undertook huge investment initiatives in marketing and manufacturing as well as enhancement in customer satisfaction. The move could prove accretive in the long term, but poses an execution risk in the near term. All the initiatives are in the initial phase of execution that makes the return on investment uncertain at the current level. Additionally, due to heavier up-front investments, Vistaprint expects its margin and earnings per share in fiscal 2012 and 2013 to decline significantly year over year.

In spite of enjoying a leading position in the industry, Vistaprint faces significant competition. Traditional graphic design & printing companies and other online suppliers target the same customers as Vistaprint.

Vistaprint witnesses a 13% year-over-year growth in new customers but the same remained flat sequentially. The stagnation in new customer growth remains a cause of concern for the company. Total orders also decelerated to 16% year over year with a higher conversion rate of 7.8%. Substantial exposure to international markets also makes the company vulnerable to currency fluctuation risks.

Agreement - Estimate Revisions

For the upcoming quarter, 3 out of 7 analysts decreased their estimates over the last 30 days based on the above fundamentals. For fiscal 2012, all 8 analysts slashed their estimates while none moved in the opposite direction.

Magnitude - Consensus Estimate Trend

During the last 30 days, estimates fell 22 cents and 98 cents for the upcoming quarter and fiscal 2012, respectively. The current Zacks Consensus Estimates for the first quarter and fiscal 2012 are pegged at 12 cents and $1.14 per share, reflecting a year-over-year decline of 48.21% and 37.43%, respectively.

Vistaprint currently retains a Zacks #5 Rank, which translates into a short-term Strong Sell rating. Some of the peers of Vistaprint are TeleTech Holdings Inc. (TTEC - Snapshot Report), Sykes Enterprises Inc. (SYKE - Snapshot Report).

Read the full analyst report on VPRT

Read the full analyst report on TTEC

Read the full analyst report on SYKE

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MLPs See Growing Energy Profits From Shale

Energy production has been growing rapidly in recent years, even through uneven growth for the overall economy. North Dakota has become the fastest growing state for energy, primarily due to gas and oil. Oil production began in 1951. By 1979, monthly production rose to 2½ million barrels (83,000 barrels per day) and remained pretty much the same through 2005. In the last six years, monthly production exploded to a record 15.3 million barrels in November 2011. That's equivalent to 510,000 barrels per day (up 150,000 over the prior year), more than Ecuador (the smallest member in OPEC) and now accounts for 10% of U.S. production. Next year it expects to become the No. 2 state (behind Texas) for petroleum production.

Recent growth comes from new technology, including hydraulic fracturing, which uses pressurized fluid and sand to break open oil-bearing rock two miles underground (largely in western North Dakota). Oil produced in North Dakota displaces imports from Middle East or Latin American countries, a national priority. The U.S. Geological Survey in 2008 estimated there were 3.0-4.3 billion barrels of oil in the Bakken formation, part of which lies in North Dakota.

Oil is presented first because most investors relate to it better than gas. But gas has the potential to supply more energy at the national level. With the advent of shale fracking technology and the discovery of massive shale plays in the U.S. (including North Dakota), the nation's supply of natural gas far exceeds current demand which has caused the price of gas to fall drastically over the last few years. The abundance and proximity of the resource suggests that the price of gas will be less volatile than oil and remain low for some time. Increased natural gas utilization is forecast for power generation as operators switch from coal to gas to take advantage of favorable natural gas pricing caused by abundant natural gas supplies. Older coal-fired facilities are being replaced with gas facilities which burns cleaner than oil and coal, producing fewer greenhouse gases. Natural gas increasingly will become the fuel of choice.

Increasing energy production from shale adds to MLP investments. Most move gas and oil around the U.S. and Canada. These MLPs have been adding to their pipelines and building more terminals for storage for gas and oil from traditional sources. But the boom in obtaining energy from shale formations gives them additional investment opportunities and it's difficult to imagine economic forces which will prevent future growth. Four of my favorites are discussed below:

Boardwalk Pipeline (BWP) supplies gas and stores energy products. In addition to conventional sources, its pipelines are located near many unconventional natural gas supply sources including the Haynesville Shale, Eagle Ford Shale, Barnett Shale, Bossier Sands, Fayetteville Shale and Caney Woodford Shale. BWP serves 45 power generation facilities and its general Partner is Loews (L). BWP yields 7.7%.

Enbridge Energy (EEP and EEQ) is expanding its Berthold rail terminal capacity in Bakken shale 80,000 b/d and already has contractual commitments for 70% of its capacity. The $145 million project complements its Bakken Expansion Program, integrating gathering pipeline capacity in western North Dakota and eastern Montana with increased North Dakota capacity. This follows a $90 million expansion of the Bakken Access Program, announced three months ago, for pipelines and storage tanks in western North Dakota to supply the Bakken Expansion. Its general partner is Enbridge Inc (ENB), a leading Canadian energy company, with 26% ownership. EEP yields 6.5% and EEQ has an implied yield of 6.2%.

Enterprise Products Partners (EPD) just announced 10-year transportation agreements for the Rocky Mountain expansion project for 82,500 barrels per day. The project is 263 miles of 16-inch diameter pipeline as well as pump station modifications. The capacity is designed for growing natural gas and natural gas liquids (NGL) production from major basins in Utah, Colorado, Wyoming and New Mexico. New natural gas processing plants are scheduled to begin service in late 2014. EPD is currently the largest MLP with 50,000 miles of pipelines, 192 million barrels of storage capacity and 8 billion cubic feet of natural gas storage capacity. EPD yields 5.2%.

Kinder Morgan Inc. (KMI) will acquire El Paso Corp (EP) by Q2. Its MLPs, Kinder Morgan Partners (KMP) and Kinder Morgan Management KMR), have roughly 23,000 miles of natural gas pipelines and EP has more than 43,000 miles of pipelines. The majority of KMP pipelines are in Texas and the Midwest, while EP pipelines stretch through the Southwest, Southeast, Mid-Atlantic and Northeast. One major benefit is that KMP will broaden its ability to transport gas from some of the largest shale plays in the country - Marcellus, Utica and Barnett shales - to areas where natural gas-fired generation is in high demand in California and Florida markets. KMP yields 5.6% and KMR has an implied yield of 6.1%.

MLP businesses, building infrastructure for moving energy products, have been strong. Rapidly expanding investments in extracting gas and oil from shale deposits and other areas which had been uneconomical are adding to investment opportunities. Financing has not been a problem for MLPs. Even during the financial meltdown three years ago, MLPs were able to obtain financing. While MLPs are generally thought of as yield securities with tax advantages, growth has been excellent at a time when it has been ragged for many industrial companies. The future for MLPs with growth and high yields has never looked brighter.

Disclosure: I am long EEQ.